Three Month Consolidation Break

We’ve swung from mildly oversold to mildly overbought. Depending on your outlook, the market is either consolidating and poised to breakout or stalling out under the weight of a long run. Regardless of opinion, another potential breakout is on deck. It will be very interesting to see if the market has enough gas to get above the previous highs. Longer term momentum indicators indicate the last portion of the run has been weak, but we have not yet seen any meaningful damage to a weekly chart.

A bull market like this one has built up a lot of goodwill over the course of its rise. It’s only rational to turn to longer-term charts for indications of weakness, otherwise, you’re going to get whipsawed on every dip. Momentum has weakened overall but is showing signs of strength recently. If the market does breakout we will reassess the strength at that time. Intuition says the risk-reward is not favorable at these levels and to wait for a pullback because it could be a big one.

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